Sale of Goods Act, 1930
Q. Define ‘Unpaid Seller’. What are
the rights available under the Sale of Goods Act to an unpaid seller?
45 define an unpaid seller as "One who has not been paid or tendered
the whole of the price or one who receives a bill of exchange or other
negotiable instrument as conditional payment and the condition on which it was
received has not been fulfilled by reason of dishonour of the instrument or
following conditions must be fulfilled before a seller can be deemed to be an
unpaid seller –
(i) He must be unpaid and the price must be
(ii) He must have an immediate right of action
for the price.
(iii) A bill of exchange or other negotiable
instrument was received but the same has been dishonoured.
of an unpaid seller can be broadly divided under 2 main headings –
against the goods and
against the buyer
against the goods:
the property in the goods has passed to the buyer – Where the
ownership in the goods has already been transferred to the buyer the following
rights are available to an unpaid seller –
of Lien – The right of lien means the right to retain the possession of
goods until the full price is paid or tendered.
lien be exercised:
the goods have been sold without any stipulation as to credit.
the goods have been sold on credit, but the term of credit has expired, and
the buyer becomes insolvent.
can be exercised even if the seller holds the goods as an agent or bailee.
Where part delivery of goods has been made, it can be exercised on the
remaining goods, unless circumstances show he has waived his right.
of lien – The right gets terminated under following circumstances:
the goods are delivered to a carrier or bailee but without reserving the right
the possession is acquired by the buyer or his agent lawfully.
the right of lien is waived by the seller.
the buyer has disposed of the goods by sale of in any manner with the consent
of the seller.
of stoppage of goods in transit – The right of stoppage in transit means
the right to stopping the goods while they are in transit, to regain possession
and to retain them until the price is paid. The essential feature of stoppage
in transit is that the goods should be in the possession of someone intervening
between the seller and the buyer. The unpaid seller can exercise the right of
stoppage in transit if:
seller has parted with the possession of the goods.
buyer has not taken possession of goods.
has become insolvent.
seller may exercise the right to stoppage in transit in any one of the
following 2 ways:
taking actual possession of the goods, or
giving notice of his claim to the carrier or other bailee in whose possession
the goods are.
to stoppage in transit is lost under the following circumstances:
(a) If the
buyer or his agent obtains possession.
after arrival of the goods at the appointed destination, the carrier or the
bailee acknowledges to the buyer that he holds the goods on his (buyer’s)
(c) If the
carrier or bailee wrongfully refuses to deliver the goods to the buyer or his
the part delivery of the goods has been made to the buyer or his agent, the
remainder of goods may be stopped in transit. But if such part delivery has
been given in such circumstances as to show an agreement to give up possession
of the whole of the goods the transit comes to an end at the time of part
of resale – Where the unpaid seller has exercised his right of lien or
resumes possession of the goods by exercising his right of stoppage in transit
upon insolvency of the buyer, he can re-sell the goods under the following
the goods are of perishable nature.
the seller has given notice of his intention to re-sell the goods and yet the
price remains unpaid.
the seller expressly reserves a right of resale if the buyer commits a default
in making the payment.
the property in the goods has not passed to the buyer – Where the
property in the goods has not passed to the buyer, the unpaid seller can
exercise the right to withholding delivery of the goods. This right is similar
to and co-extensive with the right of lien and stoppage in transit where the
property has passed to the buyer. Other remedies may include the right to claim
damages for the loss suffered, special damages, etc.
of an unpaid seller against the buyer personally
addition to the unpaid seller’s rights against the goods, he has rights even
against the buyer personally. They are as follows:
for Price – Generally the seller can sue for the price of the goods only
when the property in the goods has passed to the buyer and the price is not
paid as per the terms of the contract. In cases where the property in the goods
has not passed to the buyer, suit for price generally, cannot be maintained,
unless under the contract, price is payable on a certain date irrespective of
the delivery of passing of the ownership of the goods.
for damages – The unpaid seller can bring an action for damages where the
buyer wrongfully refuses to accept the goods or repudiates the contract.
for interest – In case of breach of contract on the part of the buyer, the unpaid
seller can claim for interest from the date of tender of the goods or from the
date, the price becomes payable along with a suit for price.